Just because you are ready to expand does not mean the business is. A honest evaluation of the situation has to be assessed. Lenders will want to know if the business has the cash flow to manage a loan, and if the business can support timely, regular loan payments. From the lender’s perspective, only healthy businesses with solid creditworthiness are in any position to successfully request an expansion loan.
There is a lot of information about the importance of personal credit scores. That criteria can impact business as well. Ironically, most business owners have no idea what their business credit profile is and how their personal credit scores can influence growth. Before looking into an expansion loan, get your personal credit score from the major credit bureaus and check with bureaus like Experian, Dunn and Bradstreet, and Equifax to get business reports.
How to go about finding these loans has evolved. Even the smallest business is no longer relegated to a small range of lenders. Factors like the Internet, amount of money needed, the lifespan of the business, the industry and business credit profile can make your business attractive to specific institutions. Take for example a business owner looking for a loan in the vicinity of $500,000. A lender might prefer the owner be someone that has been in the business a while, has a strong personal credit score and has at least $2 million in annual revenues. An online lender could partner with someone that has less time in business and $250,000 in annual revenues. Looking at your business situation better fine tunes searches and enhances the chance of success.
While overall costs could be smaller, short-term loans may have higher periodic payments. Longer term loans come with smaller payments but may have higher total costs associated with the loan. A business owner will also have to consider ROI potential, cost of expansion and other factors.